UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 10, 2002
HOVNANIAN ENTERPRISES, INC.
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(Exact Name of registrant specified in its charter)
Delaware 1-8551 22-1851059
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(State or other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
10 Highway 35, P.O. Box 500
Red Bank, New Jersey 07701
(Address of principal executive offices)
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Registrant's telephone number:
(732) 747-7800
Item 2. Acquisition or Disposition of Assets
On January 10, 2002, Hovnanian Enterprises, Inc., a Delaware
corporation ("Hovnanian" or the "Registrant"), completed its acquisition of
the California homebuilding operations of The Forecast Group, L.P., a
privately held, single family homebuilder headquartered in Rancho Cucamonga,
California ("Forecast").
The total equity value of Hovnanian's acquisition of Forecast was
approximately $176.5 million, paid by the issuance of 2,208,738 shares of
Hovnanian's Class A Common Stock plus approximately $131.0 million in cash.
Hovnanian also repaid approximately $88 million of Forecast's indebtedness.
The purchase price is subject to adjustment based on Forecast's earnings
through January 31, 2002. Additionally, and subject to option contracts, for a
period of three years following January 10, 2002, Hovnanian will have the
option to purchase certain land parcels retained by the principal owner of
Forecast valued at $49 million.
Copies of the Asset Purchase Agreement, dated as of January 4, 2002
between Hovnanian and Forecast and the Securities Purchase Agreement, dated as
of January 4, 2002, between Hovnanian and Forecast are incorporated by
reference herein to Exhibit 2(a) and Exhibit 2(b) of Hovnanian's annual report
for the fiscal year ended October 31, 2001 on Form 10-K (Commission File No.
1-8551). A copy of the press release, dated January 11, 2002, is attached as
an exhibit hereto and incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired.
Financial Statements required by this item shall be filed not later
than 60 days after the date that this report is required to be filed.
(b) Pro Forma Financial Information.
Financial Statements required by this item shall be filed not later
than 60 days after the date that this report is required to be filed.
(c) Exhibits.
Exhibit 2.1 Asset Purchase Agreement, dated as of January 4,
2002, between Hovnanian Enterprises, Inc. and
The Forecast Group (incorporated by reference to
Exhibit 2(a) to Hovnanian Enterprises, Inc.'s
annual report for the fiscal year ended
October 31, 2001 on Form 10-K (Commission File
No. 1-8551)).
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Exhibit 2.2 Securities Purchase Agreement, dated as of
January 4, 2002, between Hovnanian Enterprises,
Inc. and The Forecast Group (incorporated by
reference to Exhibit 2(b) to Hovnanian
Enterprises, Inc.'s annual report for the fiscal
year ended October 31, 2001 on Form 10-K.
(Commission File No. 1-8551)).
Exhibit 99.1 Press Release dated January 11, 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HOVNANIAN ENTERPRISES, INC.
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(Registrant)
By: /s/ Peter S. Reinhart
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Name: Peter S. Reinhart
Title: Senior Vice President
General Counsel
Date: January 24, 2002
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INDEX TO EXHIBITS
Exhibit Number Exhibit
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Exhibit 2.1 Asset Purchase Agreement, dated as of January 4, 2002,
between Hovnanian Enterprises, Inc. and The Forecast Group
(incorporated by reference to Exhibit 2(a) to Hovnanian
Enterprises, Inc.'s annual report for the fiscal year
ended October 31, 2001 on Form 10-K (Commission File No.
1-8551)).
Exhibit 2.2 Securities Purchase Agreement, dated as of January 4,
2002, between Hovnanian Enterprises, Inc. and The Forecast
Group (incorporated by reference to Exhibit 2(b) to
Hovnanian Enterprises, Inc.'s annual report for the fiscal
year ended October 31, 2001 on Form 10-K (Commission File
No. 1-8551)).
Exhibit 99.1 Press Release dated January 11, 2002.
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Exhibit 99.1
HOVNANIAN ENTERPRISES, INC. News Release
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Contact: At the Company At FRB|Weber Shandwick
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Kevin C. Hake Amy F. Glynn, CFA
Vice President and Treasurer 640 Fifth Avenue
732-747-7800 212-445-8470
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HOVNANIAN ENTERPRISES COMPLETES ACQUISITION
OF FORECAST HOMES
RED BANK, N.J., Jan. 11 /PRNewswire/ -- Hovnanian Enterprises, Inc. (NYSE-
HOV), a leading national homebuilder, announced that it closed yesterday the
acquisition of the California homebuilding operations of The Forecast Group,
L.P., a privately held, single family homebuilder headquartered in Rancho
Cucamonga, California. The combination, which was announced in December, is
expected to rank Hovnanian Enterprises as the eighth largest homebuilder in
the United States, with fiscal 2002 revenue expected to climb more than 20% to
approximately $2.1 billion and deliveries anticipated to exceed 8,500 homes.
"The price of the transaction represents only 3.1 times our expected EBITDA
for Forecast Homes over the next 12 months," said Ara K. Hovnanian, President
and Chief Executive Officer. "After taking into account the estimated effects
of purchase accounting adjustments, the acquisition is expected to be
approximately $0.50 accretive to earnings per share in fiscal 2002. As long as
market conditions remain similar to what we have been experiencing, we expect
our earnings per share in fiscal 2002 to increase to $3.00 per share, up more
than 30% from the record $2.29 per share reported in fiscal year 2001," he
added. "We expect our fiscal 2002 ending equity to exceed $500 million, or
approximately $16.35 per share, with total assets approaching $1.4 billion,"
he concluded.
The acquisition of Forecast further enhances Hovnanian's geographic
diversification, and it also advances the Company's strategy of becoming a
dominant builder in each of its markets. With the addition of Forecast's
operations, Hovnanian will become the second largest homebuilder in the Inland
Empire region in Southern California, as well as the second largest in the
combined market of Sacramento and the Central Valley in Northern California.
Hovnanian is already the largest homebuilder in New Jersey and
North Carolina and the second largest homebuilder in Washington, DC. The
Company also built more than 1,000 homes in Dallas/Fort Worth, Texas in fiscal
2001 and is among the top homebuilders in Nashville, Tennessee, Biloxi,
Mississippi, and Huntsville, Alabama.
The equity value of the consideration paid for Forecast was $176.5 million,
which was funded by the issuance of $45.5 million of Hovnanian's Class A
common shares, along with approximately $131.0 million in cash, in accordance
with the terms of the agreement. Based on Hovnanian's average closing stock
price of $20.60 during the five days prior to the closing date, 2.21 million
Hovnanian shares were issued, boosting shareholders' equity above $420
million. In accordance with the terms of the agreement, certain land parcels
were retained by the principal owner of Forecast Homes, subject to option
contracts held by Hovnanian, with optional lot purchases under these contracts
totaling $49 million over the next three years. The amount paid is subject to
certain further adjustments, based on Forecast's actual balance sheet at
closing and financial results for the month of January.
As anticipated, Hovnanian also refinanced the outstanding debt of Forecast
Homes, net of Forecast's cash balance at closing, under the Company's $440
million unsecured revolving credit agreement. To fund the acquisition and
refinance Forecast's debt on a long-term basis, Hovnanian obtained a five-
year, $150 million term loan arranged by Bank of America and Fleet National
Bank. The term loan has been fully committed by a group of ten financial
institutions and is expected to close on January 17th. This will allow
Hovnanian to maintain ample liquidity under its $440 million unsecured credit
line to fund ongoing operations and continued growth objectives.
"Forecast had a very strong month of sales in December, an indication of
continued strong demand for entry-level homes in the Sacramento and Inland
Empire markets where they are most active," stated Geaton A. DeCesaris, Jr.,
President of Homebuilding and Chief Operating Officer for Hovnanian. "In many
parts of California, demand for housing continues to outpace supply due to
tight government regulation, which limits the supply of available lots," he
added. "With the addition of Forecast Homes, Hovnanian now controls more than
45,000 lots in attractive locations. Over 70% of these lots are controlled
under option contracts, which reduces our risk and allows us to maintain
balance sheet flexibility and liquidity," he said.
"We plan to maintain two separate operations in California to better cover the
wide range of geographies and product types within the State and to leverage
both the Forecast name and the Hovnanian brand we have developed in
California," stated Mr. Hovnanian. "This will simplify and expedite the
integration of Forecast Homes, and Hovnanian already has a successful track
record of integrating acquisitions over the past few years. The growth
prospects and increased market presence for the Company have improved the
opportunities for both our current and our new associates in California," he
added.
On a pro forma basis as of October 31, 2001, the Company had a combined sales
backlog of 3,445 homes with a value approaching $900 million. "Year to
date, we have already delivered or sold more than half of the Company's
projected fiscal 2002 deliveries," Mr. Hovnanian said. "Thus we are confident
that we will earn $3.00 per share for fiscal 2002, representing a 31% increase
from our record performance in fiscal 2001," he concluded.
Hovnanian Enterprises, Inc. founded in 1959, is headquartered in Red Bank, New
Jersey. The Company is one of the nation's largest homebuilders with
operations in Alabama, California, Maryland, Mississippi, New Jersey, New
York, North Carolina, Pennsylvania, Tennessee, Texas, and Virginia. The
Company's homes are marketed and sold under the trade names K. Hovnanian,
Washington Homes, Goodman Homes, Matzel & Mumford, Diamond Homes, Westminster
Homes, Fortis Homes, and Forecast Homes. The Company is also one of the
nation's largest sellers of homes to Active Adults, under the name of
K. Hovnanian's Four Seasons communities.
Note: All statements in this Press Release that are not historical facts
should be considered as "forward-looking statements" within the
meaning of the Private Securities Litigation Act of 1995. Such
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results to differ materially. Such
risks, uncertainties and other factors include, but are not limited
to, changes in general economic conditions, fluctuations in interest
rates, increases in raw materials and labor costs, levels of
competition and other factors described in detail in the Company's
Form 10-K for the year ended October 31, 2000.